The status of the commercial agent in France (commercial agent law)

The status of the commercial agent in France (commercial agent law)

Definition

A commercial agent is an agent who, as an independent profession and without being bound by an employment contract, is responsible on a permanent basis for negotiating, and possibly concluding, contracts of sale, purchase, rental or for the provision of services, in the name and on behalf of one or more principals (producers, manufacturers, merchants, artisans or other commercial agents).

A commercial agent’s activity is generally exercised by a natural person, but may equally be exercised by a company.

Relations between the commercial agent and the principal are governed by a duty of loyalty and a mutual duty to inform.

A commercial agent must perform his mandate as a good professional. The principal must put the commercial agent in a position to perform his mandate.

The status of commercial agents

A commercial agent must, as a general principle, be registered in a special registry kept by the Clerk’s Office of the Commercial Court in the judicial district in which his domicile is located (see however our article on « Non-registration in the Special Registry and entitlement to the status of commercial agent », commenting on the French Supreme Court judgment of 7 July 2004).

The commercial agent is an independent professional and not an employee. Consequently, he is free to organise his work as he wishes.

He is solely responsible for all of the costs associated with the exercise of his activity and personally pays all of the tax and social charges pertaining thereto.

He may recruit sub-agents who will be paid by him and placed under his sole responsibility.

He is authorised to carry on his own business or represent other principals (unless bound by an exclusivity clause). He is however prohibited from representing a competing enterprise or personally carrying on a competing business, unless authorised by the principal.

He is subject to a duty of loyalty, a duty to inform and a duty of confidentiality towards the principal (see our article on « Duty to inform and duty of loyalty of a commercial agent », commenting on the French Supreme Court judgment of 30 November 2004).

A written contract is not compulsory, but each party is entitled to obtain from the other, on request, a signed document setting out the content of the agency agreement.

Remuneration conditions

The commercial agent may be remunerated by way of a fixed sum or, more commonly, a commission determined by the parties.

A geographical area is generally attributed to the agent.

Over the duration of the contract, the commercial agent is entitled to his commission where the transaction has been concluded thanks to his intervention or when concluded with a person whose custom he obtained previously for transactions of the same nature.

Where he is in charge of a geographical sector or a given group of persons, the commercial agent is also entitled to commission for any transaction concluded over the duration of the agency contract with a person belonging to this sector or to this group, even if the agent did not intervene in the transaction.

Once the agency contract has come to an end, the commercial agent is entitled to his commission, either where a transaction is mainly due to his activity during the agency contract and has been concluded within a reasonable time following the end of the contract, or where the third party’s order was received by the principal or by the commercial agent before the agency contract came to an end.

Commission is deemed to be earned as of the time the principal fills the order or performs the services, or as of the time he should have done so pursuant to the agreement entered into with the customer.

Commission is deemed to be earned at the latest when the customer pays the price or would have paid it had the principal performed his duties.

The commission must be paid at the latest on the last day of the month following the quarter in which it was earned. A statement of account must be provided to the commercial agent.

On the other hand, the commercial agent is not entitled to commission if it is shown that the agreement between the customer and the principal will not be performed and where such non-performance is not due to circumstances attributable to the principal.

End of the contract

Notice period

If the agency contract has been concluded for an indefinite term, each of the parties can terminate it subject to prior notice.

The notice period is one month for the first year of the contract, two months once the second year has begun, and three months once the third year has begun and in all later years.

Unless agreed otherwise, the end of the notice period will coincide with the end of a calendar month.

The parties cannot agree on shorter notice periods.

If they agree on longer notice periods, the notice period provided for the principal cannot be shorter than the notice period provided for the agent.

These provisions do not apply where the contract comes to an end due to serious breach by one of the parties or the occurrence of an event of force majeure.

The agency contract may also be concluded for a fixed term. If such a contract continues to be performed by both parties after its term has ended, it is deemed to have been converted into an indefinite-term contract.

Termination indemnity

If the agency contract is broken off by the principal, the commercial agent is entitled to compensation for the loss suffered.

The commercial agent can also claim this indemnity if he has been obliged to terminate the contract himself, due to breach by the principal or for reasons associated with age, infirmity or the illness which prevent him from continuing his activity.

The end-of-contract indemnity must compensate the loss suffered by the agent as a consequence.

The courts generally assess this loss as amounting to two years of commission.

The commercial agent cannot, however, claim such an indemnity in the following cases:

– the termination of the contract was provoked by a serious breach by the agent,

– the termination of the contract was made on the agent’s initiative (other than the cases mentioned above),

– the commercial agent assigns his rights to a third party who succeeds him.

In addition, the commercial agent loses his right to receive the end-of-contract indemnity if he does not notify his principal, within a period of one year as of the termination of the contract, that he intends to claim his rights.

Non-competition clause

A non-competition clause may be inserted into the agency contract. It is only valid for a maximum period of two years following the termination of the contract (see our article on « Non-competition clause and unfair competition »).

Targets clause

Commercial agent contracts frequently set out the results that the commercial agent is to attain.

The fact that the agent does not attain the specified results does not amount to sufficient grounds for the principal to terminate the contract without paying compensation to his agent.

Indeed, the courts consider that the principal must then prove that the agent committed a breach which would explain the fact that the results were not attained.